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Rental properties - claiming travel expense deductions

As a guide, travel expense deductions relate to the cost of travel a taxpayer incurs to inspect or maintain a rental property, or to collect rent.

Generally the following deductions can be claimed:

• Preparing the property for new tenants (except the first tenants)

• Inspecting the property during or at the conclusion of tenancy

• Undertaking repairs, where those repairs are a consequence of the damage or wear and tear incurred while being rented out

• Maintenance of the property, such as cleaning and gardening, while it is rented or available for rent

• Collecting the rent

• Visiting property manager to discuss rental property

A full deduction is allowed where the sole purpose of a trip relates to the rental property.

Where travel expenses are incurred partly for private purposes, only the portion that relates to the rental property is deductible.

A common mistake is claiming motor vehicle expenses for ‘incidental' travel ie. Driving past the rental property to ‘keep an eye on things' on the way to or from work.

An example of deductible travel would be as follows:

Dexter owns a rental property and it's managed through an estate agent. Dexter decides to inspect the property three months after the tenants move in. He also makes a number of visits to the property in order to carry out minor repairs.

If Dexter had travelled 200 kms during the financial year, he could claim $150 (at a rate of 75 cents per km).

Domestic travel requiring an overnight stay

A rental property may be located so far from where a taxpayer lives that it would be considered unreasonable to expect them not to stay near the property overnight when making an inspection.

A common mistake is claiming travel expenses where the main purpose of the trip is to have a holiday or for other private reasons and inspection of the property is ‘incidental' to that main purpose.

An example of deductible travel would be as follows:

Trent owns a rental property in far north Queensland but resides in Victoria. He travels to the property to carry out some minor repairs and make an inspection and stays nearby overnight. In this instance, Trent is entitled to claim the travel expenses incurred such as flights, accommodation, meals and taxi fares to and from the property.

If a taxpayer decides to take a holiday and the trip included some significant portion of time devoted to the rental property, a suitable apportionment of airfares and accommodation would be considered.

Overseas travel expenses

Where an Australian resident owns rental properties located overseas, they may periodically travel overseas on holidays and inspect their rental property at the same time. If the primary purpose of the trip is a holiday, they cannot claim the cost of getting there. They can only claim local expenses directly related to the property inspection such as taxi fares and an apportionment of accommodation expenses.

A common mistake is claiming for travel to inspect the purchase of a property. Taxpayers cannot claim a deduction for these types of costs, either within Australia or for inspecting a rental property located overseas.

Seminars

Another common mistake is claiming for travel to (or other costs of) rental seminars that are about helping taxpayers to find a suitable rental property to invest in.

Seminars are only tax deductable if they relate to producing income from the property.

Source: ATO website